Headlines:

  • China’s change of garb looks upbeat for cotton prices
    China is crossing back to being a demand issue for the cotton market, rather than a supply one. For six years or so, the country has been associated, in cotton terms, with huge inventories, a result of a guaranteed pricing scheme to growers set at values well above international levels. China’s cotton inventories, on US Department of Agriculture estimates, peaked at 66.9m bales in 2014-15, equivalent to nearly two years’ supplies, as growers sold to the government, while spinners where possible bought from the world market. However, after three seasons of sales, those inventories are beginning to look like far less of a burden. On initial USDA forecasts, China’s cotton inventories were, at 33.4m bales, forecast to fall below the equivalent of one years’ consumption for the first time in seven years in 2018-19. And stocks expectations are not getting any bigger, with reports instead of serious setbacks to planting in Xinjiang province – responsible for roughly 80% of Chinese output. While it is not clear how much output has been jeopardized, the reaction of futures in China itself signals that the loss is not trivial. Not only did Zengzhou futures for January delivery soar 9.5% in the week to Tuesday, but take-up of cotton offered from state auctions has returned to 100%, up from levels of 50% or so a month ago. As Ron Lee at US-based McCleskey Cotton put it: “Remember when we lamented the fact that more than 60m bales of cotton hung over our market via the Chinese Strategic Reserve? “Well, that number could be below 30m at the end of this marketing year.”
  • China Inc Returns to U.S. Soybean Market as Trade Tensions Ease
    China’s state grain stockpiler has returned this week to the U.S. soybean market for the first time since early April, a sign Beijing is preparing to resume purchases as trade tensions between the world’s top two economies ease, two sources said. The renewed interest in the oilseed, used in animal feed, follows Beijing’s pledge at the weekend to buy more U.S. goods from its top trading partner, including agricultural products. China made the pledge to avert a trade war that could damage the global economy. As the two sides stepped back from a full-blown trade war, Washington also neared a deal on Tuesday to lift its ban on U.S. firms supplying Chinese telecoms gear maker ZTE Corp, and Beijing announced tariff cuts on car imports.

Summary:

The Brazilian government and a group representing truck drivers were due to meet today to try to negotiate an end to their trucker protests this week over diesel prices that have affected transportation of goods ranging from auto parts to animal feed. The talks will be the first such meeting since truckers began partially blocking roads in several states on Monday to protest a rise of about 50% in fuel prices in less than a year. Temer’s government said on Tuesday it would propose a reduction in the PIS/Cofins tax on diesel fuel in an effort to end the trucker protests.

Corn futures traded higher on continued strength from Wheat. As yesterday gains were a muted some this time because of a stronger US Dollar. It expectations of new purchases from China and hot temperatures that really made to the underpinning support in Corn. The USDA announced the sale of 140,000 metric tons of Corn to Saudi Arabia the breakdown was 70k for 2017-18 and 70k for 18-19 marketing year. Soybean futures continued to trade higher given renewed optimism of Chinese business and carry over strength in the Meal market. Wheat futures traded higher from weather concern for the Northern Plains forecasted for this weekend and next week. Continued dryness in Canada, Russia and Australia continues to play key role in the strength of Wheat futures.